Motor insurance rates could soon be affected by how much and how safely you drive. Insurers are allowed to offer pay-as-you-drive car insurance plans with premiums based on mileage and driving style thanks to the Insurance Regulatory and Development Authority of India (Irdai). The pay-as-you-drive insurance plans let customers establish a mileage cap for their vehicles and provide reductions over the standard cost. The savings over the standard premium is greater the lower the limit.
The savings over the standard premium is greater the lower the limit. The only limit that will be covered by the insurance is the one that the buyer chooses. One insurance company offers three slabs: 7,500 km, 5,000 km, and 2,500 km.
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The insurance regulatory body has also suggested floating car insurance. Vehicle owners can cover multiple vehicles under a single policy, just like floater health policies do for the entire family. Floater policies are fairly common in health insurance, but it’s uncertain whether they’ll replace other options as the standard in vehicle insurance. The fact that a family’s vehicles are typically registered under many names could provide a problem for such floater insurance.
Additionally, Irdai has permitted insurance providers to give discounts based on a driver’s skill level. The user’s driving patterns and the condition of the vehicle are tracked by a telematics device installed in the automobile. Following that, this data is assessed to provide discounts to cautious drivers. Additionally, it can sanction negligent and rash drivers. For those who own many vehicles or have not been driving as much owing to Covid limitations, these improvements look to be excellent news.
If they don’t use their cars too frequently, they won’t have to pay the entire price. The introduction of these choices will assist motor own damage coverage in the nation get the much-needed boost and expand its penetration, according to a statement from Irdai.
The insurance sector has applauded the action as was expected. “This is a ground-breaking development in the realm of auto insurance.”It will increase the demand for utility-based insurance and promote safe driving practices, according to Sanjay Datta, Chief Underwriting and Claims, ICICI Lombard. “Irdai has established a win-win circumstance. Now, own damage coverage can be customised according to a customer’s driving habits.
Customers who use their cars infrequently, maintain them well, and adhere to traffic laws would gain from it, says Rakesh Jain, CEO of Reliance General Insurance.
However, a deeper look reveals that such rules can only provide a small number of advantages. The premium discounts are not that interesting (see table). If you decide to purchase the 7,500 km slab of the normal premium, you will only receive a small 10 percent discount. But the required third-party premium and other add-on coverage are unaffected and only the own damage premium is eligible for the discount. With a lower restriction of 2,500 kilometers, the savings becomes a little more alluring, but that still results in a commute of only about 7 km per day on average. Before choosing a policy with a low slab, take that into account.
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The good news is that customers who drive more than the slab restriction can upgrade to a higher slab or even a conventional unlimited policy. But before the threshold limit is reached, this upgrade should be made. Upgrades are not available following an accident or claim incident. Supriya Rathi, Whole Time Director, Anand Rathi Insurance Brokers, notes that “Insurers would have to describe the process of settling a claim if a customer exceeds the claimed usage.”
Another contentious topic is the installation of telemetry devices since it makes car owners worry about their privacy. It will undoubtedly lower the insurance rate, but the discount has a price. Only do so if you feel comfortable with the idea that the insurer will have data on your car’s movement every single day.
